British Rail: Pension Fund (Hansard, 19 April 1994)

§ The Parliamentary Under-Secretary of State, Department of Transport (Lord Mackay of Ardbrecknish)
My Lords, we hope to reach agreement very soon. Detailed discussions have taken place between our respective officials and we put our proposals to the trustees on 31st March. Copies have been placed in the Library. Although we await a formal response following a meeting of the trustees board later this week, we believe that very few issues remain unresolved between us.
The trustees have agreed in principle a mutually acceptable formula in relation to future support payments under the Transport Act 1980 to the pensioners' closed fund once it has the benefit of an absolute solvency guarantee from the Government.

§ Lord Peyton of Yeovil
My Lords, I am very glad to know that the nine-month process is about to yield some result. Is my noble friend aware that there is some satisfaction that the question of phasing capital payments into the fund, which once seemed to be a sticking point for the Government, has now been settled? At the same time there is concern and disappointment that the nibbling process is still going on, apparently with the aim of modifying the arrangements made in the memorandum of understanding governing the possibility of a surplus arising and the pensioners' share in it.

§ Lord Mackay of Ardbrecknish
My Lords, I thank my noble friend for his kind words in the first part of his question, even though the process may have taken nine months. To answer the last part of his question, that remains one of the issues that we are discussing. Indeed, the officials met yesterday afternoon and came to a form of words. Both sides have taken them away in order to study that possible solution and see whether it is 88 acceptable to both sides. It is a difficult question. It centres around any surpluses which arise in the fund subsequent to a stage when the taxpayer may have put some money into the fund and whether that surplus—or the amount equal to what the Government put in previously—should go into reserve before the division is made between the fund itself and the existing pensioners to allow them to have an increase. It is a complicated matter. We understand the problem from the other side but, equally, we believe that we have to look after the interests of the taxpayers.

§ Lord Taylor of Gryfe
My Lords, does the experience of the Government in this regard, with the rather serious delay in settling this matter, have any lessons for the Government in dealing with another large nationalised pension fund; namely, the Coal Board fund? Can we assume that, as we passed the Coal Board privatisation Bill, there will be no similar delays in the very complicated situation that arises in the coal mines?

§ Lord Mackay of Ardbrecknish
My Lords, I must advise the noble Lord that I shall deal with one pension scheme at a time, given that these are the documents that were placed in the Library on 31st March. Clearly, this privatisation was different from previous privatisations and the pension position had to be dealt with quite separately from previous privatisations. I am sure that if there are any lessons to be learned, the Department of Trade and Industry will be more than happy to learn them from us.

§ Lord Ewing of Kirkford
My Lords, will the actuarial advice that has been made available to the Government from the Government Actuary be published along with the documents that have been placed in the Library? Further to that question, has the membership of the board of trustees of the closed pension fund now been amended to include the Government's chief actuary as a member, as was originally proposed? I am sure that the Minister will be aware that we are all conscious of the strong views held by the Government's chief actuary in relation to the British Rail pension fund.

§ Lord Mackay of Ardbrecknish
My Lords, as to the first part of the noble Lord's question, certain of the agreements will be published, but I do not think that separate advice from the Government Actuary to the Government will be published unless it forms part of the eventual agreement. As to the question of whether the Government Actuary will be a member of the board of trustees, which was the original proposal, the Government recognise the potential conflict between his duties under the general trust laws and his responsibility to the Government, and we have decided not to proceed with the concept of a government director, as envisaged in the memorandum of understanding.

§ Lord Clinton-Davis
My Lords, will the Minister indicate when that was announced? In view of the heavy job losses that have already been suffered in British Rail between March and December of last year and the fears of serious job losses resulting from the activities of Railtrack, which is planning to cut the annual cost of 89 maintaining the rail network, will the Minister make the Government's position quite clear? Is it now the case that workers undertaking new jobs with different employers in the industry will be able to transfer their pension? Why, up to 1st April, were the Government insisting that that would apply only if the transfer was involuntary? Why were the Government asserting that the Inland Revenue would not permit British Rail staff to maintain their existing pensions with a new employer?

§ Lord Mackay of Ardbrecknish
My Lords, the noble Lord has asked a number of complicated questions. I am afraid that I cannot tell him the date on which the announcement about the Government Actuary was made. I am not sure whether that information is in the documents beside me, but I cannot quickly whizz through them to see. It may be that I have just announced it for the first time publicly, but who knows?
Turning to the noble Lord's other questions, the pension arrangements of existing employees of British Rail will transfer with them to the new joint industry scheme which will be set up and, thereafter, to any scheme set up by separate employers. I think that the Inland Revenue problem was that it would not recognise a scheme run by a number of different employers. Therefore, there had to be different schemes for any future different employers in the railway industry.

§ Lord Clinton-Davis
My Lords, having regard to that answer, does the Minister recognise that there is an obligation to make the position very clear to the employees, which, with respect, is rather more than that answer provided?

§ Lord Mackay of Ardbrecknish
My Lords, I am quite certain that the position will be clear to the existing employees who will know that their pension rights will transfer from the current scheme when it is divided between the two schemes: the closed scheme, to deal with existing pensioners and deferred pensioners; and the new scheme, the joint industry scheme, which will cover those continuing their employment in the railway industry.

§ Lord Ezra
My Lords, does the Minister agree that two matters of concern to pensioners in both the rail and coal pension schemes are, first, the division of surpluses and, secondly, the possibility that if the funds should run into deficiency in any one particular year there would be a consequential cut in the pension entitlement? Can the Minister give any reassurance on those two issues?

§ Lord Mackay of Ardbrecknish
My Lords, on the latter point, as I explained in my Answer to my noble friend Lord Peyton, there will be an absolute solvency guarantee from the Government. That should deal with the real substance of the question put by the noble Lord, Lord Ezra.

§ Lord Peyton of Yeovil
My Lords, while I understand that many complicated matters are involved, does not my noble friend agree that there is an underlying, basic, simple issue—the fulfilment in letter and spirit of the obligations that were undertaken by the 90 Government in the memorandum of understanding? I wonder whether my noble friend is aware of how much I hope that it will not be necessary for me to come back to ask the same Question again in three months' time.

§ Lord Mackay of Ardbrecknish
My Lords, I assure my noble friend that it is our intention to come to a satisfactory conclusion of this matter—satisfactory both to pensioners and future pensioners, and to the Government. I earnestly share my noble friend's hope that he will not have to come back to ask me another Question on this issue.